The undercover economist
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The document discusses different pricing strategies used by companies, including supermarkets. It explains that supermarkets target different types of shoppers with varying prices, such as shoppers indifferent to price versus those watching for bargains. The document also discusses strategies like sales pricing, unique target pricing based on customer profiles, and self-incrimination tactics to learn customer willingness to pay higher prices. Finally, it notes that while price discrimination can be good when balancing profits with affordability, group pricing strategies are sometimes inefficient.
The undercover economist
- 1. 1 January 2015 The Undercover Economist Chapter-2 1 The Undercover Economist -Tim Harford
- 2. 1 January 2015 The Undercover Economist Chapter-2 2 What Supermarkets don’t Want You To Know ?Scarcity power alone cannot force to pay Unlimited Price ?People may choose to pay or not ?Dilemma: Higher margin - Few Cups Lower margin - More Cups HOW?!?
- 3. 1 January 2015 The Undercover Economist Chapter-2 3 Strategy of 2 Café Fair trade Policy Variation in Price Customer Mentality ?Support ?Price is not a constraint Variation of alternatives Bad Public Relation Giving customer opportunity
- 4. 1 January 2015 The Undercover Economist Chapter-2 4 Unique Target Strategy ? Strategy of car salesman / estate agent ? Evaluate Customer : Individual Basis of Charge : Customer Affordability ? Example :
- 5. 1 January 2015 The Undercover Economist Chapter-2 5 Group Target Strategy ? Offer different price ? Evaluate Customer : Distinct Groups Basis of Charge : Price Sensitivity ? Example :
- 6. 1 January 2015 The Undercover Economist Chapter-2 6 Self-Incrimination Strategy ? Persuade Customers into confessing that they are not sensitive to price&bring willingness to pay ? Companies tend to take maximum advantage of scarcity power ? Example : Premium same for take-out and café drink
- 7. 1 January 2015 The Undercover Economist Chapter-2 7 Super market’s Art : Price Targeting Supermarket Target At Shoppers who are indifferent At Shoppers who have to Prices a sharper eye for a bargain Example : 1) M&S 2) Sainsbury
- 8. 1 January 2015 The Undercover Economist Chapter-2 8 Supermarket really Expensive? Organic Conventional Expensive Less Expensive than wholefood – Standard Pricing Advice: Shop Cheaply ! Don’t try to find a cheap store!
- 9. 1 January 2015 The Undercover Economist Chapter-2 9 Common Strategy : Sale-Pricing Super-market Sales effective form of Self-targeting 1. Loyal Customers 2. Bargain hunters What they do? ? Shops jump Between high extreme and Low extreme of price but not in the middle –They always mix it up!
- 10. 1 January 2015 The Undercover Economist Chapter-2 10 Price-targeting Price targeting may refer to: ?Price discrimination, in which a good or service is sold at different prices to different consumers ?Price point, a model of pricing ?A mechanism in monetary policy;
- 11. 1 January 2015 The Undercover Economist Chapter-2 11 When price-targeting is good ? PillCorp pharmaceutical ? Global pricing to exactly balance loss of margin. ? High price- ? Rich- no point of losing cost ? Poor- dying- greed ? Dual-Pricing policy ? A Win- Win situation
- 12. 1 January 2015 The Undercover Economist Chapter-2 12 When price targeting is bad ? TrainCorp, a passenger train company ? Price ? High price- commuters, business man ? low price- students, senior citizens ? Group pricing strategy is inefficient
- 13. 1 January 2015 The Undercover Economist Chapter-2 13 Conclusion ? Pricing should be profitable, efficient and fair. ? Understanding customers – efficient sales ? Private greed will serve the public interest.